Strategic petroleum reserves

India’s initial plan to build-up its strategic petroleum reserves (SPR) is not shaping out to be the dramatic event that could help reignite global oil demand. While New Delhi has not shown its full hand in revealing its intentions, the first reports that SPRs might provide 90 days of net import coverage had stoked industry hopes of an important new pillar of oil demand.

Following the outbreak of Gulf War in 1990, India experienced a major energy crisis. The reserves were barely enough for three days. The then Atal Bihari Vajpayee government began efforts to build India’s strategic oil reserves. The Indian Strategic Petroleum Reserve (ISPR) is an emergency fuel store of total five MMT (million metric tons) or 36,92 MMbbl of strategic crude oil that was enough to provide 10 days of consumption which are maintained by the Indian Strategic Petroleum Reserves Limited.

The crude oil storages are in underground rock caverns and are located on the east and west coasts so that they are readily accessible to the refining sector. Underground rock caverns are considered the safest means of storing hydrocarbons. The estimated cost of the project was around Rs 2,400 crore at September 2005 prices. This excluded the cost of filling the crude oil in the caverns. Approval was obtained to increase the capacity at Visakhapatnam to 1.33 MMT and to permit utilization of the additional 0.3 MMT compartment by Hindustan Petroleum Corporation Limited (HPCL) on proportionate cost sharing basis. As a result of this approval, the strategic storage capacity is 5.03 MMT.

India initially plans to build up oil reserves of 5 million tonnes (almost 40 million barrels) at three locations - Visakhapatnam, Padur and Mangalore - equivalent to almost 10 days of its average daily imports of four million bpd. Even though India’s oil demand growth is strong, its SPR programme is dwarfed by an estimated 400 million barrels of crude China has imported over the past few years to build its own SPRs, which are equivalent to some 60 days of its 7.4 million bpd imports. It is also tiny when compared to the United Stat es, where reserves stand at almost 400 days of its daily imports of over eight million bpd.